Clean Fuel Federal Update – August 2022

23 Aug 2022

Biofuels Stakeholders Rejoice with RFS Announcements and Passage of the Inflation Reduction Act

Following several quarters of rollercoaster activity at the federal level related to the Renewable Fuels Standard (“RFS”), there are now several reasons for biofuel market participants to celebrate.  First, with regards to the RFS, the Environmental Protection Agency (“EPA”), as part of a consent decree, has agreed to propose 2023 renewable volume obligations (“RVOs”) by November 16, 2022 and final RVOs by June 14, 2023.  The consent decree would settle litigation brought by Growth Energy, which sued the Agency for repeatedly missing deadlines on issuing annual RVO mandates.  The consent decree was submitted to the U.S. District Court for the District of Columbia on July 22, 2022, and the court is expected to sign off on the decree in the coming weeks.  The biofuels industry has long called for the EPA to provide RVOs in a timely fashion as the missed and delayed deadlines cause market uncertainty and negatively impact investment decisions.  This decree is one step in the right direction; more importantly, with the EPA setting volumes in 2023, the Agency will be able to set attainable volumes in the first place, streamlining the process considerably.

As the EPA considers upcoming RVOs, there is a strong push from Midwest states for EPA to increase RVO mandates.  In a July 19, 2022, bipartisan letter submitted to EPA Administrator Michael Regan, Senators Amy Klobuchar (D-MN) and Chuck Grassley (R-IA) along with 22 of their colleagues, encouraged EPA to consider higher RVOs.  They cited the ability of biofuels to reduce fuel prices and greenhouse gas emissions as driving factors for increased mandates.  For similar reasons, on July 29, 2022, Senators Klobuchar and Grassley introduced a Senate companion to the House’s Next Generation Fuels Act (H.R. 5089), which would allow the sale of fuels with higher octane levels and greater amounts of ethanol.  The legislation is similar to what was introduced in the House in 2021.     

 “When it comes to ethanol and other renewable fuels, this bill represents the most significant federal commitment to low-carbon biofuels since the Renewable Fuel Standard was expanded by Congress in 2007.”  Geoff Cooper, President and CEO, The Renewable Fuels Association

While there is still much to be clarified about how the climate and clean energy incentives in the Inflation Reduction Act (“IRA”) will be deployed, the law is another reason for biofuels stakeholders to cheer.  Approximately $500 million in funding is allocated to support buildout of biofuel infrastructure while $18 billion in funding is set aside for climate-smart agriculture, which could help biofuel producers through the production of lower-carbon feedstocks.  Other pools of funding may also be available through the IRA’s initiatives targeting rural America.  The IRA also extends several key tax credits for the sector (such as the $1/gallon blenders tax credit for biodiesel and renewable diesel, which is extended through 2024) and introduces new ones (such as the technology-neutral Clean Fuel Production Tax Credit for transportation fuel produced and sold in 2025, 2026, and 2027). 

Biofuels stakeholders are not the only ones preparing to ramp up transportation decarbonization.  EV and hydrogen stakeholders are also going to see funding and incentives from the IRA to build out infrastructure – particularly EV charging – and boost EV adoption across all vehicle classes.  While much remains up to the strength of implementation, one thing is for certain – this historic law is setting up the U.S. for an exponential clean energy growth trajectory.

This article was featured in the August 2022 edition of the Sol Standard, a quarterly newsletter that provides up-to-date pricing data, market analysis, and policy trends to keep clients up to speed on the country’s growing low carbon and clean fuels programs. To subscribe and access past editions of the The Sol Standard, fill out our subscribe form here.

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The Sol Systems Team

The Sol Systems Team